Wages in the EU, including minimum salaries, must be flexible and adjustable if more job opportunities are to be created in the coming years, according to a European Commission blueprint released yesterday.
This was not a simple accounting exercise
Tackling controversial job-related issues in the EU, such as the wage-setting mechanism, known as the cost-of-living-adjustment, or COLA, in Malta, the Commission said these had to be “adjustable” and in line with “economic realities and productivity”.
Making it clear there was no intention of proposing an EU-wide minimum wage, Employment Commissioner Laszlo Andor acknowledged that in some member states this had to be increased to prevent in-work poverty. He did not mention any particular member state.
According to the Commission, the in-work poverty rate in the EU reached eight per cent of the gainfully employed and this might require a revision of minimum wages. However, it recognised this was not a simple accounting exercise and adjustments had to be discussed and possibly agreed to with the social partners.
“Setting minimum wages at appropriate levels can help prevent growing in-work poverty and is an important factor in ensuring decent job quality,” the Commission paper states.
The impact of the minimum wage on both demand and supply can differ markedly across member states, depending on the level set and other labour market policies and institutions, it adds.
“Wage floors need to be sufficiently adjustable, with the involvement of the social partners, to reflect overall economic developments. Differentiated minimum wages, as already applied in several member states, can in that context be an effective means of upholding labour demand.”
A call to raise the minimum wage in Malta was made recently by Caritas in a report highlighting situations showing this was too low and should be increased by €100 a month. Unions and employers have reacted differently to this proposal, being discussed by the Malta Council for Economic and Social Development.
Malta’s statutory minimum wage is not considered low at EU level. Amounting to €680 a month, it ranks 10th highest among member states that have a minimum wage.
If the Caritas proposal were adopted, the minimum wage here would become the seventh best in the EU.
Interestingly, the most advanced EU economies do not have a minimum wage. These include Germany, Sweden, Denmark, Finland and Austria.
Brussels is also calling for wage-setting mechanisms to be modernised to align wages with productivity developments.
According to the EU Executive, wage-setting mechanisms must ensure that real wage growth reflects productivity developments and local labour market conditions are a pre-condition to ensure that output growth adequately translates into growing labour demand and, ultimately, job creation.